Canada is one of the easiest places in the world to start a business.
But that doesn’t mean that there’s nothing to do.
And when it comes to getting your new business set up, what you don’t do when you should do it will come back to bite you.
Use the following checklist to ensure that your new business is ready to operate smoothly and legally when you open your doors.
1) Choose the right form of business ownership.
What is the right form of business ownership? The one that fits both the management structure you’re going to use and your liability comfort level.
For instance, if you and your wife are both going to be involved in the business, your business form of ownership needs to reflect the level of involvement. Will there be a boss and an employee (a sole proprietorship)? Or equal partners (a partnership)?
And what level of liability risk are you prepared to take on? Incorporated businesses have some liability protection, but sole proprietorships have none. Are you prepared to risk your house on the success of your new venture?
2) Register your business name as required.
In most provinces and territories, most business names have to be registered, no matter what form of business ownership you have chosen. Usually, the only exception is that of a sole proprietor who is using his or her own legal name with no additions. Otherwise, you need to go through the registration process (and pay a fee). You will need to consult with the Provincial Registry in your province or territory for details about the procedure.
3) Register for the appropriate Canada Revenue Agency accounts.
Most businesses in Canada need to register for GST/HST and even if you think you don’t need to when you first start out because you won’t make enough money (because of the Small Supplier exception), it’s a good idea to register for it anyhow so:
1) you can claim back the GST/HST your business pays out in the course of doing business; and
2) you’re not blindsided by a “Where’s your GST/HST remittance?” notice from the CRA when you inadvertently make more than the permitted Small Supplier amount.
You will also need to register for a Business Number if you have a incorporated business, are going to have employees, are going to import or export goods, for example.
4) Get the appropriate licenses and permits in place.
Discovering that you don’t have a necessary permit or license in place when you’re already trying to do business can be costly; you might end up having to shut your business down until you’ve got it sorted out and/or pay hefty fines.
Fortunately, the government of Canada has set up a free service to help businesspeople find out what permits and licenses they need; BizPal.
5) Set up a business bank account.
Do this right away. Yes, it’s irritating that business accounts have higher fees than personal accounts. But your business needs its own bank account because you need a clear financial trail for accounting and tax purposes. Don’t be one of those people who has x expenses disallowed because their business finances are all mixed up with their personal ones.
6) Choose and set up an accounting system.
The time to do this is before you start, not after. You need to have your accounting system set up and operating from the get-go to:
- Keep your business finances organized and up to date so you can keep track of the money;
- Have clear financial records for accounting and tax purposes;
- Give customers the accurate records of transactions they require; and
- Save you from having to pay someone to input months or years of accounting data.
Your accounting system may be a POS system, an accountant, accounting software, a bookkeeper or any combination of these, but take the time before you start your business to figure out what accounting system will work best for you and get it in place.